Palm gains on forecasts of weaker output, tracking related oils

KUALA LUMPUR: Malaysian palm oil futures jumped to their highest in over a week on Wednesday evening, supported by forecasts of weaker output and stronger related edible oils.

The market was also earlier supported by a weaker ringgit , palm's currency of trade which typically makes the tropical oil cheaper for holders of foreign currencies.

The ringgit fell to its weakest levels against the dollar since the start of the year on Wednesday, and was last down 0.2 percent at 4.0280 ringgit per dollar.

The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange rose 1.7 percent to 2,315 ringgit ($574.73) per tonne at the close of trade, its strongest gains in a day since May 7.

It earlier rose to an intraday high of 2,319 ringgit, its strongest levels since June 18.

Trading volumes stood at 39,745 lots of 25 tonnes each at the close of trade.

"Production for June is not seen coming up," said a futures trader in Kuala Lumpur.

"Especially on the Sabah and Sarawak side, workers there are not back yet so there is not much harvesting going on. Overall production (for June) is going to be down," he said, referring to the two states in East Malaysia which are the largest producers of palm oil in the country.

Palm oil workers, a large portion of whom are Indonesian, went on long leave for the Eid-al-Fitr public holiday, which celebrates the end of the Muslim fasting month of Ramadan, leaving plantation owners with fewer workers to pick ripe palm fruit bunches.

Palm oil output in the world's two-biggest producers may decline amid disruptions in the fruit harvesting process because of a backlog of farmers trying to sell fruit to Indonesian mills and as Malaysian planters struggle with a post-holiday labour shortage.

Another trader added that gains in related edible oils gave additional support to palm.

The Chicago July soybean oil contract gained 0.4 percent, while the September soybean oil on China's Dalian Commodity Exchange rose 1.5 percent.

Meanwhile, the Dalian September palm oil contract was up 1.1 percent.

Palm oil prices track the performance of other edible oils, as they compete for a share in the global vegetable oils market.